Question:

Visualise transaction fees on Polygon since July 1, 2022.

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Compare these to fees on Ethereum over the same time period - are they correlated? Do they diverge significantly at any points? Provide analysis as to why you think this might be.

Introduction:

Ethereum is the blockchain with a smart contract feature for decentralisation among users. \n

Polygon is an L2 on Ethereum which has the following advantages:

• faster transcations

• lesser fee than ETH

• interoperability

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Methodology:

We would be comparing Polygon Fees across all chains instead of limiting just to Ethereum and try find if there’s any correlation between ETH fees and Polygon fees since July 1st and the extent of the correlation

The transactions tables for the following chains were used to get the data curated- ETH, SOL, arbitrum, optimism, flow, BSC , osmosis,flow and polygon. Specifically, the tx_fee column was used across most of them and the data was compared

Fees is not an independent parameter even On Polygon and Ethereum and simply comparing fees of one chain to another would be a disaster. We would instead look at other parameters as well like - Users, Transactions and % successful transactions as well

Summary:

The following would be shown:

• Fees across chains (in $)
• Fee Dominance By Fee Per Transaction (in $)
• Percent Successful transactions across chains
• Transactions across chains
• User Based Count
• Normalised fee view to find correlation between ETH and Polygon Fee
• Eth vs Polygon Fee

Explanation and Insights:

Polygon has the third highest active user base count after Ethereum and Solana and has the third highest fee per transaction as well when compared with other chains . Notably, Solana has a lesser fee per transaction than Polygon while BSC as expected has a higher fee per transaction

What’s also notable is that Solana beats Ethereum in the number of transaction by a margin but Ethereum has more number of distinct users daily implying Solana is more of a ‘bot-chain’ . Polygon has a decent number there . Only 50% of the transaction pass on the Polygon network implying that there is a lot of congestion . On days with higher number of transaction, more fee is accrued as can be seen from the charts as well.

By Fee dominance per transaction, Ethereum is followed by BSC and Polygon. Other L2s like optimism and arbitrum come down below polygon.

Even for fees accumulated by chain, Ethereum accounts for 95% of all fees across all chains while Polygon has less than 2% dominance there while Solana holds the second spot because of it’s high number of transactions.

Next, we find that the correlation between the fee in ETH and in Polygon to be pretty decent as in the normalised view we almost get a constant of about 0.7% as compared to 99.3% of fees on Ethereum vs Polygon

To be exact with the data, we found the correlation between the two here And it was found to be a whopping 0.83! This means that the fee on ETH is super high and one can say with about 83% confidence that if the fee on ETH is high, the fee on Polygon would be too.

Coming onto absolute data, about 3M$ is collected as fees on Ethereum while on Polygon it’s about 25k$ on an average while the fee per transaction on Polygon is about 0.4% only when compared with all chains. While for Optimism it’s 1/6th of that Polygon. This means that Polygon has a higher charge per transaction than some L2’s as well.

Polygon has about 50% of the total active users of Ethereum and that’s a very positive figure

Conclusions:

• It can be concluded that yes, Polygon has a very high correlation of 0.83 with Ethereum
• It can also be concluded that while ETH has an average collection (in fee) of about 4M$ , Polygon has only about 25k$ on an average
• Polygon has the third- largest user base after ETH and SOL and also the third largest fee per transaction and fee dominance
• Among other L2s Polygon generates more fee than any other
• Polygon has only about 50% or less of successful transactions unlike ETH which has a very high value of percent successful transactions . That’s because it penalises heavily on failed transactions saving the network from congestion.
• The fee dominance in order across chains are- ETH,, SOL, Poly, BSC, Optimism, Osmosis, Arbitrum, AVAX and FLOW
• The user dominance in order are- ETH,, SOL, Poly,AVAX, OSMOSIS, Arbitrum, BSC , Optimism and FLOW
• There is also a high correlation in the number of transactions and the fee collected across all chains except Flow (since it is a gasless chain)